EDAIF under pressure to lend more
The Export Development and Agriculture Investment Fund (EDAIF) is requesting that its traditional source of funding, a 0.5 per cent levy on non-petroleum imports, be increased to 0.75 per cent in a new law that will replace the existing one next year.
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The move is to enable the fund, which specialises in providing stable capital to export-oriented companies in the agro-processing and agriculture sector, to meet the rising demand for its funds, as well as properly position it to fund the operations of businesses other than those in the agricultural sector.
The new bill has since received Cabinet approval, according to its Chief Executive Officer, Mr Suleimana Mustapha, and is now waiting to be laid before Parliament for consideration and possible passage into law.
In addition to widening the funding sources of the fund, the CEO said the new bill would also position EDAIF to be able to support small and medium size enterprises (SMEs) in the manufacturing sector unlike the current law which limits it to export development and promotion, agric and agro-processing.
The CEO disclosed these to the GRAPHIC BUSINESS on the sidelines of the Lagos International Fair, which ended on November 10.
About 51 companies from the food and beverage, handicraft, textiles and garments and footware industry were sponsored by the Ghana Export Promotion Authority (GEPA) and EDAIF to participate in the 10-day fair.
EDAIF to support industry
The fund was established about 13 years ago as the Export Development and Investment Fund (EDIF) to provide financial support for export-oriented companies. It has, however, undergone series of restructuring to enable it to meet changing trends in the business environment.
The most recent one widened its mandate to include funding businesses in the agriculture and related areas, hence, its new name EDAIF.
These changes notwithstanding, the fund's CEO said recent events showed that EDAIF needed another restructuring to enable it to reflect present day challenges in the country's business arena.
Key among those, he said, was the need for EDAIF to support industry.
"Currently, the law under which we operate is under review and the idea is that they should broaden the scope so that EDAIF can go beyond just export development and promotion, agric and agro-processing to even industry, generally. And therefore, in the new bill that is going to come to Parliament, it is proposed that the levy be increased to something like 0.75 per cent so that we can raise that additional money to be able to cater for the expansion in our operational mandate," Mr Mustapha said, adding that there are also many other proposals on funding in the new bill being readied for Parliament.
It is, however, not clear if Parliament will grant those requests, especially given that some of them will amount to passing on the cost implications to consumers and citizenry in general.
Returns on investments
Although EDAIF, per its current law, is entitled to 10 per cent of the net proceeds from any divested state-owned enterprise (SOEs), the CEO said the limited nature of SOEs in the system meant that that source of funding was running dry, hence, the need to find a replacement.
"There hasn't been many divestures and so that income source is not there," he said.
Fortunately, however, Mr Mustapha said returns on the fund's investments had being encouraging so far and that had helped to cushion it from the pressures coming in from interested companies.
Such investment earnings, he said, currently constituted about five to 10 per cent of EDAIF's total fund portfolio.
EDAIF going higher
According to the CEO, the fund disbursed about US$110 million to businesses last year, an amount he said was projected to rise some US$140 million in the ongoing year.
"Since the middle of 2012 to middle of this year, we have more than doubled the disbursement and it is on that trajectory; we are going higher and higher and we just hope that the funds will flow in," he added.
About US$7 million has been the highest amount given to an individual applicant.
The CEO also disclosed that unlike the past when most banks were reluctant in disbursing funds from EDAIF to their costumers, all the commercial banks in the country have now signed up to the facility and are now eager to cooperate in that regard.
He also added that his outfit was looking at expanding the scope of the disbursing institutions, referred to as designated financial institutions (DFIs), from the current commercial banks to the rural and community banks (RCBs).
Graphic Business/Ghana